REFINANCE calculator

Interpreting Your Refinance Calculator Results

The results from the ez Home Search mortgage refinance calculator help illuminate if refinancing is the right choice for you. Here’s how to make sense of what the numbers are telling you:

If Both Your Monthly Payment and Interest Will Decrease

This is the ideal scenario. If the results show that your monthly payment and the total interest paid over the life of the loan will decrease, it’s a strong indication that refinancing could be a smart financial move. This scenario means you’ll save money now and in the long run. That makes managing your budget easier and reduces the overall cost of your mortgage.

If Your Monthly Payment Increases But You Save on Interest

Sometimes, refinancing results in a higher monthly payment but saves money on interest over time. This often happens when you refinance to a shorter loan term, like moving from a 30-year, with 15+ years left to repay, to a 15-year mortgage. Your monthly payment might increase, but the reduced loan term means you’ll pay significantly less interest over the life of the loan. This loan option is worth considering if your goal is to pay off your mortgage faster and save on interest.

If Your Monthly Payment Decreases But You Pay More Interest

In some cases, refinancing to lower your monthly loan payment could lead to paying more interest over the loan’s life, especially if you extend your loan term. This might be a good option if you need to lower your monthly expenses temporarily to manage other financial obligations or life changes. Just be aware that while your immediate payment drops, the long-term cost may be higher due to additional interest.

If Both Your Monthly Payment and Interest Will Increase

If the results show that your monthly payment and the total interest will increase, refinancing may not be the best option unless you have a compelling reason. This may be converting from an adjustable-rate mortgage (ARM) to a fixed-rate mortgage for payment stability. This scenario usually suggests that refinancing won’t save you money and might cost you more in the long run.

Break-Even Point

Another important result is the break-even point—the period of time it takes for the savings from refinancing to cover the costs of refinancing. Refinancing could be beneficial if you plan to stay in your home beyond this point. If you expect to move sooner, the savings might not be enough to justify the costs.

Key Takeaway: Use these insights to align your refinancing decision with your financial goals: lowering your monthly payments, saving on interest, or paying off your mortgage sooner. And remember, you can always speak with one of our trusted local real estate experts or lenders to get advice tailored to your situation.

Reasons to Refinance Your Mortgage

Refinancing your mortgage can be a strategic financial move with a range of benefits. A few common reasons why homeowners choose to refinance:

Lower Your Interest Rate

A popular reason to refinance, even a slight reduction in your rate can significantly lower your monthly payments and save you thousands of dollars in interest over the life of the loan. This can free up cash for other financial goals or investments.

Reduce Your Monthly Payment

Refinancing to a longer loan term can reduce monthly payments and add room in your budget. This can be particularly beneficial if you need to manage other expenses or your monthly cash flow has changed.

Shorten Your Loan Term

Refinancing to a shorter loan term, like moving from a 30-year to a 15-year mortgage, can help you pay off your home faster. The monthly payments may be higher, but the overall interest savings and quicker path to full ownership can be worth it.

Switch from an Adjustable-Rate Loan to a Fixed-Rate Mortgage

If you currently have an ARM and are concerned about rising interest rates as your initial period ends, refinancing to a fixed-rate mortgage can provide stability and predictability. This option protects you from potential payment increases if interest rates rise in the future.

Access Your Home’s Equity (Cash-Out Refinance)

A cash-out refinance allows you to tap into your home’s equity by refinancing for a higher loan amount than you currently owe. The difference is paid to you in cash. Use those funds for home improvements, debt consolidation, education expenses, or other financial needs.

Eliminate Private Mortgage Insurance (PMI)

If you initially purchased your home with a down payment of less than 20%, you might be paying PMI. Refinancing might eliminate PMI if your home’s value has increased or you’ve paid down enough of your mortgage to reach 20% equity. That will reduce your monthly payment. Just note that not all Freddie Mac and Fannie Mae guaranteed loans require 20% equity to eliminate PMI. Check your loan terms.

Consolidate Debt

Refinancing can consolidate higher-interest debt, such as credit card debt or personal loans, into a single loan with a lower-interest payment. This can simplify your finances and reduce the overall amount of interest you pay.

Adjust to Life Changes

Life events such as marriage, divorce, or a change in your financial situation might prompt a refinance. Whether you need to add or remove a borrower from the loan (e.g. after marriage, after a divorce, or due to a death), adjust your payment structure, or access cash for a significant expense, refinancing can help adapt to these changes.

Before deciding to refinance, weigh the potential benefits against the costs. Look at how the move aligns with your overall financial goals. Use our ez Home Search mortgage refinance calculator to explore different scenarios. Consult with one of our trusted local experts to verify you’re making the best decision for your situation.

How Much Does It Cost to Refinance?

Refinancing your mortgage comes with a cost similar to the financing fees you paid when you originally purchased your home. It’s important to understand these fees so you can decide if refinancing is a financially sound decision. Here’s a breakdown of the common refinance fees:

Application Fee

This fee covers the cost of processing your loan application. It is typically non-refundable, even if your loan doesn’t get approved. It may include the cost of running a credit check and initial administrative work.

Loan Origination Fee

A lender charges a loan origination fee for processing the new loan. This fee is usually 0.5% to 1% of the total loan amount and covers the lender’s administrative costs.

Appraisal Fee

An appraisal is required to determine your home’s current market value. This helps the lender assess the amount of equity you have in the property. Appraiser fees generally range from $300 to $500, depending on the location and size of your home.

Title Search and Title Insurance

A title search is conducted to confirm that the property’s title is clear of any liens or legal issues. Title insurance protects the lender and the borrower against potential title defects. These costs vary but typically range from $400 to $700.

Home Inspection Fee

Although not always required, some lenders may request a home inspection to verify the property is in good condition. This fee generally ranges from $300 to $500.

Attorney or Closing Fees

Some states require an attorney to handle the closing process. The attorney or closing fee covers the cost of preparing and reviewing all legal documents. This filing fee varies widely but typically ranges from $500 to $1,000. It is due at the time of closing.

Recording Fee

This fee is charged by your local government to update public records with your new mortgage information. It typically ranges from $25 to $250, depending on where you live.

Prepayment Penalty

If your current mortgage has a prepayment penalty, you will be charged a fee for paying off your existing loan early. This fee depends on your original mortgage terms.

Discount Points

Discount points are optional fees paid upfront to lower your mortgage interest rate. One point typically costs 1% of the loan amount and reduces your annual interest rate by about 0.25%. This cost can be worth it if you plan to stay in your home for a long time and want to save on interest.

Private Mortgage Insurance (PMI)

You may need to pay PMI if your new loan exceeds 80% of the home’s value. While this isn’t a direct fee at closing, it’s an additional cost that could be included in your monthly mortgage payment.

Understanding these costs is crucial when considering a refinance. To decide if refinancing makes sense, use our mortgage refinance calculator to compare your current loan against a potential new loan. Remember, speaking with one of our trusted local experts can help you navigate the refinancing process. We want you to make the best financial decision for your situation.

How to Calculate Refinance Savings

Calculating your potential savings from refinancing is critical in determining whether it's the right move for you. By comparing the costs and benefits of your current mortgage with a new one, you reveal how much you could save. Here’s how to calculate your refinance savings using our mortgage refinance calculator:

1. Enter Your Current Loan Details
• Current Loan Balance: Input the remaining principal balance on your current mortgage. This is the amount you still owe, not the original loan amount. Your accumulated principal and interest payments have worked to pay down the loan.
• Current Interest Rate (%): Enter the interest rate you currently pay on your mortgage. This rate impacts your current monthly payments and total interest paid over the life of the loan.
• Current Term (Months): Provide the total length of your current loan in months. For example, a 30-year mortgage would be 360 months.
• Origination Year: Enter the year your current mortgage was originated. This helps calculate how many years you’ve already paid and how many are left.
2. Input the New Loan Terms
• New Loan Amount: Enter the amount you plan to borrow with the new mortgage. This might equal your current loan balance, or you may choose to borrow more if you’re doing a cash-out refinance. In that case, remember to add your cash-out amount.
• New Interest Rate (%): Provide the interest rate for the new mortgage. A lower mortgage rate can reduce the monthly payments and total interest paid over time.
• New Term (Months): Input the length of the new loan in months. You might choose to extend the term to lower your monthly payments. Shorter-term loans will pay off the mortgage faster.
3. Include Refinance Closing Costs
• Refinance Fees ($): Enter the total estimated cost of refinancing. That’s all lender fees such as loan origination rate, appraisal, title insurance, and other closing expenses. These fees will impact your overall savings.
4. Calculate and Compare
• Monthly Payment Comparison: The calculator will show how the new monthly payment compares to your current payment. This helps you see immediate savings or changes in your cash flow.
• Total Interest Savings: Compare the total interest you’ll pay on your current loan versus the new loan. This shows how much you could save in interest over the life of the loan.
• Break-Even Point: The calculator will determine the break-even point, which is how long it will take for the savings to cover the refinancing loan costs. If you plan to stay in your home longer than this point, refinancing could be beneficial. This part will be coming soon. Claim your ez Home Search account today to find the estimated value of your home and to be notified when this feature is added to the calculator.
5. Evaluate Your Results
• If your new monthly payment is lower and you’ll save on total interest, refinancing could be a smart financial move.
• If the break-even point aligns with your plans for staying in the home, refinancing could save you money over time.
• If your monthly payment decreases but your total interest increases, consider whether the immediate cash flow benefit outweighs the long-term cost.

By following these steps and using our mortgage refinance calculator, see how much you could save and make an informed decision about refinancing.

If you’re unsure or need personalized advice, our trusted local real estate experts and lenders are available to help you navigate your refinance options.

What to Consider Before Refinancing

Refinancing a mortgage can have significant benefits, but weigh all the factors before making a decision. Evaluate the following before you move forward:

1. Your Long-Term Goals
• Consider how long you plan to stay in your home. If you’re planning to move in the near future, the savings from refinancing might not be enough to cover the costs. However, if you plan to stay in your home for many years, refinancing could help you substantially save over time.
2. The Break-Even Point
• The break-even point is the time it takes for your savings from refinancing to cover the costs associated with it. Refinancing could be a smart move if you’re planning to stay in your home beyond this point. However, it might not be worth the effort if you expect to sell or move before reaching the break-even point.
3. Current Interest Rates
• Interest rates fluctuate, and the rate you secure will greatly impact your savings. Evaluate whether the current rates are favorable and how they compare to your existing interest rate. Even a small difference in interest rates can greatly impact your monthly payment savings and total interest paid over the loan’s lifetime.
4. Your Credit Score
• Your credit score weighs heavily into the actual rate you’ll be offered. Refinancing could open the door to a lower rate if your credit score has improved since you first took out your mortgage. Conversely, if your credit score has declined, you might not qualify for the best refinance rates available.
5. Refinance Costs
• Refinancing costs money in application fees, appraisal fees, and closing costs. You need the funds to afford this or plan to roll them into the new loan. Factor these into your decision and determine whether the potential savings outweigh the upfront expenses.
6. Loan Term Changes
• When refinancing, you can adjust the entire term of your loan. Extending the term can lower your monthly payments. However, the reduction in payments may increase the total interest you pay over time. Conversely, a shorter term can help you pay off your mortgage faster and save on interest, but it will raise your monthly payment.
7. Personal Financial Situation
• Consider your current financial situation, including your cash flow, debt-to-income ratio, and other financial obligations. Refinancing should align with your overall financial strategy and not stretch your budget too thin. Consult with your financial advisor.
8. Market Conditions
• The housing market and economic conditions affect your refinancing decision. For example, rising home values might increase your home equity. That will allow you to refinance without paying private mortgage insurance (PMI). It could open the door for a cash-out refinance loan, so you can access additional funds for paying off outstanding debt or renovations. On the other hand, economic uncertainty might lead to fluctuating interest rates that make refinancing unfavorable at the time.
9. Expert Guidance
• Refinancing is a significant financial decision with long-term implications. Having all the information you need to make the best choice for your unique situation is essential. Get valuable insights and personalized advice by speaking with our trusted local real estate experts and qualified professionals. They can help you understand your options and navigate the refinancing process. Feel confident you’re making a decision that supports your financial goals.

Before taking the plunge, fully understand the potential benefits and costs of refinancing. By considering these factors and consulting with an expert, confidently decide whether refinancing is right for you.

Refinancing Next Steps and Resources

Once you decide that refinancing is right for you, follow a clear path to ensure a smooth and successful process. Take these steps:

1. Review Your Current Mortgage
• Gather your current mortgage details, including your outstanding loan balance, interest rate, loan term, and any prepayment penalties. Understanding your existing mortgage terms will help you evaluate whether refinancing is worth pursuing.
2. Check Your Credit Score
• Your credit score plays a crucial role in the interest rate you’ll be offered. Check your credit report and score to ensure there are no errors. Take steps to make your score as high as possible before applying. If your credit score needs improvement, consider boosting it before refinancing.
3. Use Our Mortgage Refinance Calculator
• Input your current mortgage details and potential new loan terms into our mortgage refinance calculator to see how much you could save. This tool can compare different scenarios and determine whether refinancing makes financial sense.
4. Get Pre-Approved
• Before you start the formal refinancing process, getting pre-approved by a lender is a good idea. Pre-approval provides insights into the loan terms you qualify for and helps you shop around for the best rates and terms.
5. Gather Documentation
• Refinancing requires similar documentation to your original mortgage. Be prepared to provide proof of income, tax returns, bank statements, and information about your current loan. Having these documents ready will speed up the refinancing process.
6. Speak with a Trusted Expert
• Refinancing can be complex, and having all the information you need to make the best decision is important. Our trusted local real estate experts and mortgage loan specialists are here to provide personalized advice and guide you through the process. They can help you understand your options and navigate challenges. That way, you ensure you’re making a choice that aligns with your financial goals.
7. Apply for Refinancing
• Once you’ve chosen a lender and the terms that work best for you, submit your application for refinancing. Be prepared for an appraisal of your home and a thorough review of your financial circumstance by the lender. You’ll also need to provide proof of homeowners insurance and any additional money you’ll be adding to lower the principal and interest.
8. Close on Your New Loan
• After your application is approved, you’ll go through the closing process similar to when you first bought your home. Review all the final documents carefully, including the final loan estimate, to make sure the terms are as expected. Be ready to pay any closing costs.
9. Stay Informed
• Refinancing is just one step in managing your mortgage and reaching financial success. Stay informed about your loan terms, market conditions, and your financial situation to make the best decisions for your home and budget.

Additional Homeowner Resources

• Mortgage Refinance Calculator
• Affordability Calculator
• Trusted Local Experts

Taking the time to follow these steps and utilize the available resources will help you confidently navigate the refinancing process. Whether you’re looking to lower your monthly payment, pay off the loan in a shorter time, or access your home’s equity, having a clear plan and the right support will ensure you make the best decision for your financial future.